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Christopher Fox Media Relations Bain & Company Ph: 646-290-6103 Email: christopher.fox@bain.com

Company Ph: 646-290-6103 Email: christopher.fox@bain.com Luxury Market Update 2012 Outlook 2004 2005 2006 2007 2009
Company Ph: 646-290-6103 Email: christopher.fox@bain.com Luxury Market Update 2012 Outlook 2004 2005 2006 2007 2009
Company Ph: 646-290-6103 Email: christopher.fox@bain.com Luxury Market Update 2012 Outlook 2004 2005 2006 2007 2009

Luxury Market Update 2012 Outlook

2004

2005

2006

2007

2009

June 10, 2009

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

In 2008 the luxury goods market was flat Worldwide Luxury Goods Market trend (1995-2008 E)
In 2008 the luxury goods market was flat
Worldwide Luxury Goods Market trend (1995-2008 E)
CAGR:
€200B
6,5%
170 170
159
160
146
134 134
134
130
128
CAGR 04-08 E
120
111
6%
98
93
84
CAGR 00-04
76
80
0,8%
+6,5%
CAGR 95-00
+0%
14%
40
11% 10%
5%
14%
17%
3%
0%
-
5%
5%
9%
9%
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E
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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
In 2009 we expect the market to shrink by 10% ESTIMATES Bain Forecast April 2009
In 2009 we expect the market to shrink by
10%
ESTIMATES
Bain Forecast April 2009
Main Assumptions
• First semester average
By
market trend as the worst
€200B
semester
actual one:
-15%-20%
170
154
• Slower decrease in the second
half of the year: -5% - 0%
150
100
By channel
-10%
• Retail Like-for-Like
decreasing as the current trend
(-5%, -10%)
50
• Compensation effect to the
decrease of already committed
new openings and full
potential of 2008 numerous
new openings
0
2008
2009FK
At constant exchange
rates – assuming no
change in the forex for
• Wholesale crisis as for actual
order campaign (-20%) with
aggressive mark-down
campaigns (-30% on 50% of
products)
2009
Source: Bain analysis
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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

We developed long-term forecasts for luxury market following a twofold approach

forecasts for luxury market following a twofold approach Methodology Top-down approach • Regression based on

Methodology

Top-down approach
Top-down
approach

• Regression based on correlation of Luxury market and real GDP between 1995-2008

• Market forecast based on GDP projections by geographical area

forecast based on GDP projections by geographical area Luxury goods market Forecasts Bottom-up approach • Market
forecast based on GDP projections by geographical area Luxury goods market Forecasts Bottom-up approach • Market
Luxury goods market Forecasts

Luxury goods market Forecasts

Bottom-up approach
Bottom-up
approach

• Market estimates based on benchmarking of competitors’ current trading and sell-in/sell-out projections for the next seasons

Sources

• Bain Luxury Study

• Analyst reports

• Worldwide trade associations

• International Monetary Fund (World Economic Database)

• Bloomberg research

• Interviews to

- players’ top management

- industry experts

- luxury retailers

• Analyst reports

*wholesale calculated through average mark-ups

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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

We found strong historical correlation between Luxury market and key macroeconomic facts

Luxury market and GDP development (current exchange rate) Indexed (1995) 300 WW Luxuy market 200
Luxury market and GDP development (current exchange rate) Indexed (1995) 300 WW Luxuy market 200
Luxury market and GDP
development (current exchange rate)
Indexed (1995)
300
WW Luxuy
market
200
Real GDP
100
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Correlation of Luxury market with macro-indicators (EU example) Pearson correlation (-1 to +1); Example Europe
Correlation of Luxury market
with macro-indicators (EU
example)
Pearson correlation (-1 to +1);
Example Europe Luxury market
0.96
0.96
1.0
0.90
0.8
0.72
0.72
0.6
0.4
0.20
0.2
0.01
0.0
1.3
1.8
0.2
2.0
0.9
0.3
0.7
Real GDP
Tourist
arrivals
Housing
prices
Wealth
(liquid assets)
Disp. income
Stock price
Consumer
confidence

Growth

multiple

Luxury market outperformed economic development

Luxury market development closely related macro-indicators

Luxury market development closely related macro-indicators Luxury market can be forecasted using GDP projections 5 This

Luxury market can be forecasted using GDP projections

5

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Order taking will be negative until FW10

Order taking will be negative until FW10 Order taking 2009 Order taking 2010 Also order taking
Order taking 2009
Order taking 2009
Order taking 2010
Order taking 2010
be negative until FW10 Order taking 2009 Order taking 2010 Also order taking forecasts can be

Also order taking forecasts can be a proxy of market trend for next 12-24 months

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

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Luxury market will not recover before 2012 Bain Forecast (Constant exchange rates) Main Assumptions €200B
Luxury market will not recover before 2012 Bain Forecast (Constant exchange rates) Main Assumptions €200B

Luxury market will not recover before 2012

Luxury market will not recover before 2012 Bain Forecast (Constant exchange rates) Main Assumptions €200B 150
Luxury market will not recover before 2012 Bain Forecast (Constant exchange rates) Main Assumptions €200B 150

Bain Forecast

(Constant exchange rates)

recover before 2012 Bain Forecast (Constant exchange rates) Main Assumptions €200B 150 100 50 0 174

Main Assumptions

€200B

150

100

50

0

174 170 170 162 154 156 +7,5 0% % +4% +1% -10%
174
170
170
162
154
156
+7,5
0%
%
+4%
+1%
-10%

207

2008 2009 2010 2011 2012

• Dramatic decline of -10% in 2009

• 2007 market value recovered by 2012

• GDP trend:

-strong contraction in 2009 -flat in 2010 -recovery beginning 2011

• Luxury reaction with a multiple of 1.8 on a global basis to GDP trend

• 2009 and 2010: GDP forecast adjusted based on current trading and order taking

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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

The current crisis is changing consumer trends

The current crisis is changing consumer trends Reduce & Reuse • Consumers “ shop their closets

Reduce & Reuse

• Consumers “shop their closets”, reusing purchases from past years

• Shoppers are trying to update their wardrobes inexpensively

• refreshing their looks with few key items and accessories

Polarize

Value

for

Money

Under-

statement

Down-trading on fashion items, investing in evergreen items

• Accelerating Cheap & Chic

Fast Fashion players winning the game

Delay high-ticket and classic/basic purchases

• Booming season-end sales and discount channels

• Willing to spend only for items and brands who pass the worth-it- test

Aspirational consumers trading down

Austerity is fashionable even for wealthiest consumers

Extravagant spending considered irresponsible or disrespectful

Luxury shame, impacting negatively logo and showy products

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Women are trading down on fashion items

Women are trading down on fashion items Main trends in Female Luxury Consumption ABSOLUTE ASPIRATIONAL ACCESSIBLE

Main trends in Female Luxury Consumption

ABSOLUTE

ASPIRATIONAL

ACCESSIBLE

Value proof brands and long lasting products revamp Drastic decrease in ostentation - --- “Cheapest
Value proof brands
and long lasting
products revamp
Drastic decrease in
ostentation
-
---
“Cheapest and chic”
“Fashion for
money”
--
=
CLASSIC /
CONTEMPORARY
FASHION

Main consumption shiftsfor money” -- = CLASSIC / CONTEMPORARY FASHION Impact on market trend 9 This information is

Impact on market trend= CLASSIC / CONTEMPORARY FASHION Main consumption shifts 9 This information is confidential and was prepared

9

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Men are delaying classic and formal purchases

Men are delaying classic and formal purchases Main trends in Male Luxury Consumption ABSOLUTE ASPIRATIONAL ACCESSIBLE

Main trends in Male Luxury Consumption

ABSOLUTE

ASPIRATIONAL

ACCESSIBLE

Delaying purchase Niche loyal fashion freak -- = Trading down “Casual for money” --- -
Delaying purchase
Niche loyal fashion
freak
--
=
Trading down
“Casual for money”
---
-

FORMAL

CASUAL/FASHION

Main consumption shiftsdown “Casual for money” --- - FORMAL CASUAL/FASHION Impact on market trend 10 This information is

Impact on market trend--- - FORMAL CASUAL/FASHION Main consumption shifts 10 This information is confidential and was prepared by

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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Some trends will fade away slowly, but others are here to stay Accelerated & upcoming
Some trends will fade away slowly, but
others are here to stay
Accelerated &
upcoming
trends that
will fade out
„Reduce, reuse,
recycle“
“I think there was too much of
everything…the whole industry had
to take a laxative”
Diane Von Fustenberg
Consumption
caps
„Inconspicious
consumption“
Luxury
“I believe the cautious approach of
customers everywhere towards
spending on luxury goods is
„Redefine true luxury“
shame
something that will stay…”
Patrizio di Marco, President and Ceo,
Gucci
Accel-
“Real value” for
money
erated,
lasting
„Polarization“
Spend
Consumer
polarization
trends
experience
“Nice to have has vanished. But for
compelling pieces, there’s no price
resistance…”
Michael Burke, CEO, Fendi
“Some prices are just too expensive
for what you are getting. Hermès is
doing very well. Why? I can still use
my mother’s handbags…”
Diane Von Fustemberg
Consumer
Brand
Feminisation
Tribalism
conscience
fatigue
Trends
that stay
“I don’t think it’s only the financial
relevant
problem
it’s
also that there was
kind of indigestion. Fashion became
Technology
Individu-
Sensory/
dependence
alism
just too much…”
indulgence
Dries Van Noten
2007
2008
2009
2010
Core trends
Emerging trends
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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Despite the crisis, long-term prospects for the luxury market remain strong

long-term prospects for the luxury market remain strong • Despite current negative trends, market fundamentals

• Despite current negative trends, market fundamentals remain strong in the long-run

• Growth of personal wealth and HNWI

forecasted to recover from the second half of

2010

and HNWI forecasted to recover from the second half of 2010 • Global GDP forecasted to

• Global GDP forecasted to grow in 2010

• “New luxury segments” are emerging:

working women, men, new generations, emerging markets

• Continuing growth of aspirational consumer base (especially in Asian and emerging markets)

New opportunities may come from changing values and consumption habits

may come from changing values and consumption habits Growing customer base 12 This information is confidential
may come from changing values and consumption habits Growing customer base 12 This information is confidential
may come from changing values and consumption habits Growing customer base 12 This information is confidential

Growing customer base

changing values and consumption habits Growing customer base 12 This information is confidential and was prepared
changing values and consumption habits Growing customer base 12 This information is confidential and was prepared

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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.